Last year saw Bitcoin take a flying start, soaring past the $1000 mark and rising prodigiously. However, it soon went from a sharp rise into a zig-zag of ups and downs. The fluctuations, sometimes across a single day, were in the tens of thousands of dollars. Bitcoin remains controversial in both the mainstream media, and the specialist financial media.
But for every financial expert, institution, and government that cautions against investing in Bitcoin, there is a very vocal group who advocate for it as the cure to many of our current economic woes as a society. Bitcoin continues to fascinate and, more importantly, it is definitely making some people a lot of money?
So is Bitcoin a good investment option? The short answer is yes, but before you go rushing to invest, make sure you understand what you're getting into.
Buying Or Holding
When one first decides to invest in Bitcoin they have two options for how to go about doing so, they can either buy the currency itself and hold onto it in the hopes that it will increase in value. The question you have to ask yourself is whether Bitcoin will increase in value. Given the wild fluctuations in the price of Bitcoin recently, it seems reasonable to assume that Bitcoin will increase in price…at some point. But remember, it is also prone to decreasing, if it increases after decreasing it still might not recover its value.
Should I Invest?
As with most investment questions, a simple yes or no doesn’t really convey the answer properly. Bitcoin, and cryptocurrencies more generally, present unique challenges for the financial and investment worlds. When we speculate about investing in Bitcoin we are guessing at the course through uncharted waters. So, while investing in Bitcoin is a perfectly viable option, it is vital that you remember the first and most important rule of investing – don’t invest what you can’t afford!
If you buy some Bitcoin then, barring the oft-predicted bursting of the Bitcoin bubble, it will probably eventually increase in value. However, while the overall trend has so far been up, there have been wild and unpredictable fluctuations. As long as you can afford to live without access to the money that you’ve invested in Bitcoin, this should be a reasonably safe investment option.
Whenever you buy Bitcoin – check out Crypto Head for an easy to follow guide – make sure that you move it to a private wallet to be stored, rather than leaving it on the exchange. This is because in the past exchanges have been targets for cybercriminals. In some cases, millions of dollars have been stolen.
Trading is different to buying Bitcoin, with trading you use traditional financial instruments, such as futures, in order to invest in Bitcoin. Using these, you do not buy and hold any Bitcoin, rather you pledge to buy and sell at certain prices and dates. It is also possible to ‘bet’ on whether Bitcoin ends higher or lower than its current value on a given date in the future.
If you plan to invest in Bitcoin, regardless of how you plan to go about it, you need to make sure to follow the golden rule. Only ever invest money that you can afford to lose. If you forget this rule, you are opening yourself up to a lot of potential trouble further down the line.